IT is a measure of the shift in both sides' positions over the past two years that the Palestinian team on the Middle East peace negotiations can now officially declare their membership of the Palestine Liberation Organisation (PLO) without provoking Israel to walk out of the peace process. Israel agreed to join the talks only because the fiction was maintained that it was not talking directly to the PLO. It was an open secret even then that the Palestinian negotiators took their instructions from the PLO leadership in Tunis, but direct talks with the PLO were banned under Israeli law. However, Israel has gradually softened its stance since last year's general elections brought to power a relatively dovish government under Labour Prime Minister Yitzhak Rabin. Israeli Foreign Minister Shimon Peres continued to maintain yesterday that his government was not talking to the PLO, but to a Palestinian delegation who had been appointed members as a ''gimmick''. But neither the Palestinian team nor the Israeli opposition can be blamed for believing the latest development is a prelude to direct talks with the PLO. In such delicate diplomatic manoeuvres, the words with which concessions are disguised are often as telling as the concessions themselves. Mr Peres's remark that Israel would continue talking to a Palestinian delegation who were ''not members in any terrorist organisation'' is a clear indication of the changes in the way the PLO has approached the peace-process. PLO leader Yasser Arafat, once reviled as a terrorist, now appears more dovish than the official negotiators. To most Arabs - certainly to most Palestinians, who believe it should be the capital of their future state - his offer to postpone discussion of the fate of East Jerusalem is a sell-out. That the negotiators were apparently prepared to accept this and withdraw their resignations in return for appointment to the PLO steering committee setting policy for the talks, shows how desperate the Palestinians have become. Despite, or because of, Israel's tough handling of the Palestinian uprising, its deportation of Muslim Fundamentalist hardliners and the cruelty of last month's offensive in southern Lebanon, the PLO is ready to make progress. Yet it would be premature to declare peace is breaking out on all fronts. The right-wing opposition to Mr Rabin's government is weak and divided. But real progress in the talks means bargaining away territories that Israel has occupied and settled since 1967, a prospect which could revive the fortunes of the hawks. On the Arab side, progress depends more on Syria than on the Palestinians. Whatever Mr Arafat's position, a nod from Damascus could unleash a campaign of terror by Palestinian rejectionist groups and the now restrained Hezbollah that could set the peace process back.
